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Elements of a Good Business Plan

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A good business plan can be an invaluable tool. Banks and lenders rely heavily on them. Entrepreneurs and small business owners can use them as a foundation for launching a business as well as for guidance for growing a business.

Business plans follow a fairly standard format. However, that doesn’t mean you can knock out a business plan in the space of an afternoon. Writing a good business plan requires substantial investment of time and effort. Significant research is required before you can begin to write. Furthermore, the substance of each business plan is as unique as the business that it describes.

Executive Summary
The executive summary represents and overview of your entire business plan. For an established business, the summary should include a mission statement, basic information about the company, highlights from the company’s history, a brief statement about products and services, financial information and future plans for the business. Summaries for startups and new entrepreneurs should stress the experience of the owner and the perceived gap that the new enterprise is intended to fill.

Business Description
The business description of a business plan is self-explanatory. This section should describe the business and its products and services along with its present and/or potential customers. The section should conclude with any competitive advantages of your business, such as expert personnel or innovative products.

Market Analysis
The market analysis provides an opportunity to demonstrate how your business fits within the marketplace, as well as how it stacks up against its competitors. The section should include the business’ target customers, their critical needs and how the business fills those needs. The pricing structure for the business, market share and any regulations that impact the business should be included in this section as well.

Organization Management
This section should provide detailed financial and professional information about the principals for your business. You should also include information about stock holdings for principal officers in the business. The section should also include information about the company’s board members and their involvement with the business.

Service or Product Provided
Naturally, this section should describe the actual products or services offered by the business. This section should also include information about any intellectual property owned by the business as well as research and development that is being conducted.

Sales Strategies
If your business is established, this section should cover four elements in depth: the present market penetration of the company’s services or products, a strategy for future growth in market share, a description of distribution channels and a communication strategy to reach your business’ customers. Startups should focus on projected strategies for future growth.

Funding Requirements
If you are seeking financing for your company or entrepreneurial venture, this section of the business plan is especially critical. Besides mentioning the amount of money being sought, you should also include what the money will be spent on. This section should also include a projection for the next five years, including any plans you might have for the business, including expanding its product or services or adding locations.

Financial History and Projections
It’s unrealistic to ask for financing without providing detailed information about how your business has spent money in the past. This includes banking statements for the past three to five years. You should also include a realistic forecast for up to five years in the future, including income statements and projected expenditures. Projections for the first year should be broken down month by month; projections for future years should be reported by quarter. Graphs and trend analysis visuals often enhance this section.

While the appendix is optional, you’ll probably want to include one if you’re submitting a business plan to a creditor. That’s because the bulk of a business plan is often public, while an appendix frequently includes confidential information. This is where you’ll include personal credit reports (if your business does not have an established credit history), copies of leases for your office or manufacturing plant, contracts and other pertinent documents.

Writing Your Business Plan
Depending on the nature of your business, some sections will receive more emphasis than others will. For instance, a solo entrepreneur consultant won’t have much to include in the organization management or product sections of a business plan. By contrast, a company with an extensive product line will probably require more extensive information in nearly every section of its business plan. That’s not a problem. In fact, highlighting the unique aspects of your business is one way that your business plan can help you stand out from your competition.

Audrey Henderson

Posted In: Management

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